Audit Chamber: Russia’s financial market too small, too risky

MOSCOW, Jan 28 (PRIME) -- Russia’s financial market is too small for the economy and carries significant risks, the Audit Chamber said in a report on Tuesday after an analysis of the main directions of the financial market development in 2016–2018.

The Global Competitiveness Index puts Russia at 43rd place out of 141 states, but Russia is 95th by the financial market development, 115th by bank stability, and 120th by financial system stability. “This points to the significant risks of the Russian financial market, according to the international experts,” the Audit Chamber said.

The low position means that the financial market is incomparable with the scale of the Russian economy and its needs of financial resources and investment. The condition of banks, which occupy the largest share of the Russian financial market, is the worst – their assets and equity did not grow noticeably in 2016–2018, while the amount of banks shrank by about 33.4% and their concentration grew, the report read.

Lending to the non-financial sector of the economy shrank in real terms in the three reporting years, while in nominal terms it grew only by 70.9 billion rubles compared with a 4.2 trillion ruble increase in lending to individuals. This means that lending conditions to the producing sector of the economy are unfavourable, the Audit Chamber said.

Russian businesses also need additional conditions and stimuli to attract more capital through public share floation. The Russian stock market outperformed many foreign markets over the past year, but the increase of capitalization mainly happened due to the growth on the secondary market and was unconnected to fund raising by issuers, as public placements were sporadic.

In the three years under research, public share issues on the Moscow Exchange accounted only for 325.3 billion rubles, or 2.9% of total capitalization growth, and the combined amount of issuers listed on the exchange contracted due to bankruptcies and delistings. Raising of new capital by businesses was insignificant as compared with raising of banking loans and bond issues, the Audit Chamber said.

The most significant reserves for development of the financial market are expansion of banking lending to non-financial companies and creation of conditions for fund raising through public placements. Competition on the financial market also contracted as the amount of institutions fell in the period, and needs to be improved to add another factor of support, the report read.

(62.3380 rubles – U.S. $1)

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